Philippines Faces Hawkish Fed-Driven Currency Pressure
The Philippines may face increased currency pressure due to the hawkish stance of the US Federal Reserve (Fed), according to a recent note from ANZ Research. The country, along with Indonesia and India, has lagged in benefiting from the AI-driven trade cycle and continues to grapple with trade imbalances.
According to Khoon Goh, head of Asia research at ANZ Research, these economies have seen their currencies weaken due to high oil prices and higher US interest rates making it challenging to attract portfolio inflows. The peso has already weakened towards 63 to the dollar amid expectations of higher US yields.
The Fed's recent rate hike by 25 basis points to a range of 3.75 percent to 4 percent may further exacerbate currency pressure on these economies. ANZ warned that the region's heavy exposure to the AI boom could also leave it vulnerable to a reversal, with any pullback in AI spending quickly feeding through to exports and onto growth.